Date: 20050614
Docket: T-569-05
Citation: 2005 FC 842
BETWEEN:
SAVANNA ENERGY SERVICES CORP.
Plaintiff
and
TECHNICOIL CORPORATION, NABORS CANADA LP,
NABORS DRILLING LIMITED, H & R DRILLINGS ULC,
NABORS CANADA ULC, RYAN ENERGY TECHNOLOGIES,
NABORS CANADA and NABORS INDUSTRIES LIMITED
Defendants
[1] This appeal from an order of Prothonotary Milczynski raises an interesting point of procedure under the Federal Courts Rules. Must an application to add additional defendants be supported by an affidavit setting forth facts in justification?
[2] The facts are not complicated. Savanna issued a statement of claim against the first two named defendants, Technicoil Corporation and Nabors Canada LP, alleging breach of patent with respect to drilling rigs. The statement of claim was filed 24 March 2005. On 3 May 2005, before either defendant had filed a statement of defence, Savanna moved for an order granting it leave to file and serve an amended statement of claim in the form attached to the motion. By order dated 16 May 2005, the application was granted over Technicoil's objections. Nabors Canada LP did not appear on the motion. No reasons were given save that the order states:
AND UPON reading the motion records of the parties and upon hearing the submissions of counsel;
[3] In brief, the amended statement of claim alleges that the defendant, Nabors Canada LP, is or was a partnership. Two of the six new defendants are alleged to be the partners thereof. The other four new defendants are alleged to be a partnership, the partners thereof, and a parent company of three of the new defendants. The allegations are that Nabors Canada LP and the new defendants acted in concert and with a common design to make, construct and use drilling rigs in infringement of plaintiff's patent.
[4] The statement of claim was also amended to claim damages.
[5] Rule 104(1)(b) provides:
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104.(1) At any time, the Court may ... (b) order that a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined be added as a party, but no person shall be added as a plaintiff or applicant without his or her consent, signified in writing or in such other manner as the Court may order. |
104. (1) La Cour peut, à tout moment, ordonner: [...] b) que soit constituée comme partie à l'instance toute personne qui aurait dû l'être ou dont la présence devant la Cour est nécessaire pour assurer une instruction complète et le règlement des questions en litige dans l'instance; toutefois, nul ne peut être constitué codemandeur sans son consentement, lequel est notifié par écrit ou de telle autre manière que la Cour ordonne. |
[6] Technicoil points out that Rule 363 requires a party to a motion to set out in an affidavit the facts to be relied upon in the motion that do not appear on the Court file. There was no supporting affidavit, much less one which set out facts setting forth the legal status of the new defendants, their relationship and their relevance to the action, i.e. facts which would, according to Technicoil, allow the Court to decide whether their presence is necessary to ensure that all matters in dispute may be effectively and completely determined. Although it was suggested to counsel for Technicoil, and conceded, that any victory might be pyrrhic in that, except for minor wasted costs and timebar should that be an issue, nothing prevents Savanna from discontinuing the current action and filing a fresh one naming all eight defendants. Alternatively, a separate action could have been instituted against the six new "Nabor" defendants followed by a motion to consolidate proceedings under Rule 105.
[7] In opposition, Savanna's position is that a motion to add defendants should be treated in the same way as ordinary motions to amend pursuant to Rule 75, which, subject to provisos which have no application here, states that "... the Court may, on motion, at any time, allow a party to amend a document, on such terms as will protect the rights of all parties." The Federal Court of Appeal has made it clear that, if the nature of the amendment is clear, there is no need to lead evidence as to the facts alleged. On the contrary, in VISX Inc. v. Nidek Co.(1996), 72 C.P.R. (3d) 19; [1996] F.C.J. 1721 (QL), it was held that the Court should not accept evidence in support of an application for leave to amend pleadings. The rationale is that the Court must assume that the facts pleaded in the proposed amendments are true for the purposes of considering whether or not to grant leave.
[8] Apart from the fact that the text of Rules 75 and 104 differ, it should also be noted that a statement of claim may be amended without leave if the defendant has not put in a defence, or consents.
[9] It is conceded in this case that the amended statement of claim does disclose a cause of action in the sense that Technicoil could not possibly move at this stage, pursuant to Rule 221, to have it struck for not disclosing a cause of action.
[10] There are a number of cases which touch upon the issue. In chronological order they are: Noss Aktiebolag et al v. Aktiebolaget Celleco et al (1982), 65 C.P.R. (2d) 105 (F.C.T.D.), Marceau J.; Canderel Ltd. v. Canada, [1994] 1 F.C. 3 (C.A.); VISX, supra; and Merck & Co. Inc. v. Apotex Inc., [2004] 2 F.C.R. 459 (F.C.A.).
[11] Noss is a decision under former Rule 1716 which dealt with the joinder of parties. Marceau J. dismissed the application "as there is no allegation of any kind (the amended statement of claim contains none and no affidavit was filed in support of the motion) on the basis of which the order sought could be granted...". It is not definitive as it appears to mention allegations in the amended pleading and affidavits in the alternative, which has permitted both parties to submit that properly read it supports their respective points of view.
[12] Canderel was a motion to amend, which did not involve adding new defendants. With respect to amendments, Décary J.A., speaking for the Court, said at page 24:
9. ...while it is impossible to enumerate all the factors that a judge must take into consideration in determining whether it is just, in a given case, to authorize an amendment, the general rule is that an amendment should be allowed at any stage of an action for the purpose of determining the real questions in controversy between the parties, provided, notably, that the allowance would not result in an injustice to the other party not capable of being compensated by an award of costs and that it would serve the interests of justice.
[footnote omitted]
[13] He also asked the question first posed by Lord Esher, M.R., in Steward v. North Metropolitan Tramways Company (1886), 16 Q.B.D. 556 (C.A.), at page 558: "If the amendment is allowed now, will the plaintiff be in the same position as if the defendants had pleaded correctly in the first instance".
[14] VISX, also decided under the old Rules, was another motion to amend, but not to add a defendant. Isaac C.J. said:
In most cases, as here, affidavit evidence is unnecessary...
The Rules are clear that pleadings are to contain the material facts, and only the material facts, upon which the parties rely. Where the nature of the amendments is clear, there is no requirement to plead the evidence by which those facts are to be proved. See de Korompay v. Ontario Hydro (1990), 34 C.P.R. (3d) 168 (F.C.T.D.). In determining whether an amendment to a defence should be allowed, it is often helpful for the Court to ask itself whether the amendment, if it was already part of the proposed pleadings, would be a plea capable of being struck out under Rule 419. If yes, the amendment should not be allowed. See, for example, Chrysler Canada Ltd. v. The Queen,[1978] 1 F.C. 137 (T.D.). Procedurally, the Court will not receive any evidence where the basis for striking out paragraphs in a statement of defence is alleged to be that they disclose no reasonable defence (Rule 419(1)(a)). Rule 419(2) expressly prohibits the use of evidence on a Rule 419(1)(a) motion. In similar fashion, the Court should not accept any evidence in support of an application for leave to amend pleadings under Rule 420, unless evidence is required in order to clarify the nature of the proposed amendments. Rather, the Court must assume that the facts pleaded in the amendments are true for the purposes of considering whether or not to grant leave to amend.
[15] Merck is a decision of the Court of Appeal, leave to appeal to the Supreme Court dismissed, from a decision of the Trial Division dismissing an application from a prothonotary's order granting the defendant leave to file an amended statement of defence and counter-claim.
[16] Décary J.A., speaking for the majority, agreed with Canderel and VISX as far as they went, i.e. the amended pleadings must show a triable issue. It does not follow, however, that a proposed amendment which does show a triable issue should automatically be allowed. In Merck, the proposed amendments represented a radical departure from the position held by the party during 10 years of proceedings and repudiated admissions made in the pleadings and during discovery. He concluded that it was in the interests of justice that a withdrawal of admissions and the raising of a radically new defence be denied in the circumstances. He relied strongly on Bowman T.C.J., as he then was, in Continental Bank Leasing Corp. v. Canada, [1993] 1 C.T.C. 2306; (1993), 93 D.T.C. 298 (T.C.C.), where he said at page 2310:
All [amendments] must be assigned their proper weight in the context of the particular case. Ultimately it boils down to a consideration of simple fairness, common sense and the interest that the courts have that justice be done.
[17] The Merck decision is also most important because it reformulated the standard of review on appeals from discretionary orders of prothonotaries as follows:
"Discretionary orders of prothonotaries ought not be disturbed on appeal to a judge unless: (a) the questions raised in the motion are vital to the final issue of the case, or (b) the orders are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts."
[para. 19]
[18] Although disjoining a defendant may well be a vital issue, an order permitting the addition of new defendants is not vital to the outcome of the case. If it turns out their presence is unnecessary and Technicoil is put to additional expense it may well have its costs, in any event of the cause.
[19] Having come to the conclusion that the joinder is not a vital issue to the outcome of the cause, is it appropriate that I exercise discretion de novo on the grounds that the prothonotary did not give reasons? The reference to "motion records of the parties" and "hearing submissions of counsel", in my opinion, is sufficient to preclude me from exercising discretion de novo. (Anchor Brewing Co. v. Sleeman Brewing & Malting Co. (2001), 15 C.P.R. (4th) 63 (F.C.T.D.); Pharmaceutical Partners of Canada v. Faulding (Canada) Inc., 2002 FCT 1010, [2002] F.C.J. 1305 (QL) (at para.9); General Electric Co. v. Wind Power Inc., 2003 FCT 537, [2003] F.C.J. No. 692.) The prothonotaries deal with an extraordinary volume of procedural issues. It would be intolerable, and the wheels of justice would grind most slowly indeed, if each discretionary order had to be accompanied by a full set of motivated reasons in order to discourage the unsuccessful party from appealing and inviting the Court to exercise its discretion anew. In any event, I would have exercised my discretion as the Prothonotary did.
[20] However, the second issue raised by Technicoil is one of law. If the law requires a motion to join parties be accompanied by an affidavit dealing with new facts, then the appeal must be allowed. The order does not state that the prothonotary exercised discretion under Rule 55 to waive any irregularity.
[21] I agree with Prothonotary Milczynski that there was no need for the motion to join new defendants to be accompanied by an affidavit. Although the analogy between Rules 75 and 104 is not perfect, and thus the cases cited by Savanna are distinguishable, I care not to distinguish them because, in my opinion, their underlying philosophy is equally applicable to a motion under Rule 104.
[22] Notwithstanding Rule 363, it has been well established that a motion to amend pleadings should not be accompanied by an affidavit dealing with the new facts set out in the proposed amendment. I see no reason why the same should not hold true in an application to amend by adding a new party. It would be inappropriate if those facts, which normally are taken to be true, would be subject to cross-examination before a statement of defence was put in, before an exchange of documents and before examinations for discovery. I say this with Rule 3 in mind:
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3. These Rules shall be interpreted and applied so as to secure the just, most expeditious and least expensive determination of every proceeding on its merits. |
3. Les présentes règles sont interprétées et appliquées de façon à permettre d'apporter une solution au litige qui soit juste et la plus expéditive et économique possible. |
[23] This is not to say that there are no cases in which a motion to join a non-party should not be accompanied by an affidavit. I am thinking of situations in which the case has already been well developed and the proposed joinder marks a radical departure from the party's previous position, such as in Merck, supra. However, in this case Technicoil has yet to file a statement of defence. A parallel action against the six new "Nabor" defendants with the risk of a different judgment could be an embarrassment to the Court. In this case, Technicoil is in the same position as if the six new "Nabor" defendants had been named in the first place.
[24] For these reasons the appeal shall be dismissed, with costs.
"Sean Harrington"
Judge
Toronto, Ontario
June 14, 2005
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-569-05
STYLE OF CAUSE: SAVANNA ENERGY SERVICES CORP.
AND
TECHNICOIL CORPORATION, NABORS CANADA LP, NABORS DRILLING LIMITED, H & R DRILLINGS ULC, NABORS CANADA ULC, RYAN ENERGY TECHNOLOGIES, NABORS CANADA and NABORS INDUSTRIES LIMITED
PLACE OF HEARING: CALGARY, ALBERTA
DATE OF HEARING: JUNE 9, 2005
REASONS FOR ORDER : HARRINGTON J.
DATED: JUNE 14, 2005
APPEARANCES BY:
David. M. Reive FOR PLAINTIFF
Tamela J. Coates FOR DEFENDANT Technicoil
SOLICITORS OF RECORD:
Dimock Stratton LLP FOR PLAINTIFF
Toronto, ON
Fraser, Milner, Casgrain FOR DEFENDANT Technicoil
Calgary, AB